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vested stock options Archives - Help with mergers & acquisitions, raising capital, creating stock options and other equity plans

Posts Tagged ‘vested stock options’

Acquisition: What Happens After a Shift of Power? Part 3

Is your money on the line?

We have recently introduced a few of the procedures for moving forward with stock options in a merger or acquisition. In parts one and two, we discussed vested and unvested options, acceleration mechanics and events and also conveyed the importance of understanding your stock option plan or individual grant agreement.

In part three, we will answer your questions by introducing how the terms of your merger or acquisition could affect the future of your stock options.  While your individual documents should grant you some insight, the future of your stock options depends heavily on the terms of your company’s unique merger or acquisition.

Vested options: There are multiple things that could happen to vested options and the final outcomes will occur according to how the merger or acquisition is structured.  Vested options could:

  • Remain unchanged (company must remain intact)
  • Rolled over into options for the buyer
  • Turned into cash payment upon cancelation

According to MyStockOptions.com, “Sometimes companies provide a choice to employees: Vested options are either cashed out or swapped for vested options in the acquirer. Depending on the structure of the acquisition, you may have to exercise your options before the deal closes. Your stock plan may provide the board the power to force an exercise. If so, you would receive whatever your company’s shareholders receive (e.g., cash, acquirer’s stock, or a combination) in exchange for their stock.”

Unvested options: As we discussed in our previous posts, the future of unvested options in a merger or acquisition is often uncertain. The purchasing company could simply make an exchange of the company’s options for their own, leaving things relatively unchanged or a new grant could be offered. It is also common for the acquiring company to grant stock options under their traditional plan; these typically resemble the packages for new hires. It is also possible, but unlikely, for options to be cashed out.

There are still multiple aspects of a merger or acquisition to understand before being able to fully comprehend the future of your stock options. Check back in a few days for part four. We will dive deeper into the topics of deal factors, valuation and option conversion.

Stock Connections specializes in working with San Francisco Bay Area companies that are involved in mergers & acquisitions, are raising capital, or creating stock option or other equity plans. We help start-up, private and public firms become – and remain – SEC-compliant. Stock Connections’ services are designed to help both start-ups and established firms comply with SEC and other regulations in their equity compensation programs. If you or anyone you know is looking to get involved with any of the above, we encourage you to contact us today.

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